Trade Cycles

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Trade Cycles The argument is something like this: Most of the business is done with burrowed muney. When business prospects are good, the banks freely extend credit facilities. Assured of cheap and easy credit facilities, the businessmen go on expanding their business, entering  into further and further commitments. A huge superstructure of credit is built up. This superstructure can be […]

TRADE CYCLES

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TRADE CYCLES The world has registered remarkable economic progress especially during the last 150 years. But it would be wrong to think that this economic progress has been a . steady upward swing and a continuous movement forward. On the other hand. every businessman knows that, after ten or twelve years, the production machinery receives a rude shock, […]

A. CONSUMPTION AND SAVING

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A. CONSUMPTION AND SAVING This section considers consumption and saving I behavior, beginning with individual spending patterns and then looking at aggregate consumption behavior, Recall from Chapter 21 that consumption (or, more precisely, personal consumption expenditures) is expenditures by households on final goods and services, Saving is that part of personal disposable income that is not consumed Consumption is the […]

ACCOUNTING ASSESSMENT

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ACCOUNTING ASSESSMENT This chapter has examined the war economists measure national output and the overall price “level.Having reviewed the measurement of national output and analyzed the shortcomings of the GDP, what should we conclude about the adequacy of our measures? Do they capture the major trends? Are they adequate measures of overall social’welfare? The answer was aptly stated in a review […]

The Producer Price Index (PPI).

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The Producer Price Index (PPI). This index, dating from 1890, is the oldest” continuous statistical series published by the BLS. It measures the level of prices at’ the wholesale or producer stage. It is based on approximately 3400 prices. including prices of foods, manufactured products, and mining products. The fixed weights used to calculate the PPI are the net sales of each […]

GDP Deflator

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GDP Deflator. Another, widely used price index IS the GDP deflator, which we met earlier in this chapter. The GDP deflator is the price of all goods and services produced in the country (consumption, investment, government purchases, and net exports)- rather than of a single component (such as. consumption). This index also differs from the additional CPI because it is a variable-weight […]

The Consumer Price Index (CPI).

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The Consumer Price Index (CPI). The most widely used measure of inflation is the consumer price index, also known as the CPl. calculated by the Bureau of Labor Statistics (BLS). The CPI measures the cost of buying a standard basket of goods- at different times. The market basket includes the prices of food. clothing, shelter. fuel, transportation. medical care, college tuition.’ and […]

Price Indexes

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Price Indexes W’hen newspapers tell us “Inflation is rising” they are really the movement Of a price index, A price index is a weighted average of the prices of a number of goods and services. In constructing price indexes. economists. weight individual prices by the economic importance of each good. The most important price indexes are the consumer price index, the […]

Omitted Environmental Damage

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Omitted Environmental Damage In addition to omitting activities,sometimes GDP omits some of the harmful side effects of economic activity,An important example is the omission of environmental damages. For example, suppose the residents of Suburbia buy 10 million kilowatt-hours of electricity to cool their houses, paying Utility Co. 10 cents per That $1 million covers the labor plant costs, and fuel costs. But suppose […]

Omitted Non market Activities

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Omitted Non market Activities Recall that the standard accounts include primarily market activities. Much useful economic outside the market. For example, college students are in human capital. The national accounts record the tuition, but they omit the opportunity costs of earnings forgone. Studies indicate that inclusion of non market investments in education and other ‘areas would more than double the national saving […]